Resilient supply chains survive disruptions and keep customer connections

Dramatic shifts in consumer buying increase the need for visibility

Mature global supply chains are highly efficient, integrated networks designed to optimize price and cost in an environment of secure supply, but they are sometimes not as suited to times of disruption, such as the pandemic. That challenge also caused consumer buying behavior to shift dramatically.

Companies are still working to meet these two new demands, and less-mature organizations, which still collect and store information via personal relationships and make decisions based on the knowledge of individuals, are most at risk. This is especially true when personnel leave, change roles, take sick leave, or retire. Relying on retained knowledge is not sustainable.

The solution is organizational sustainability, with the new resilient supply chain relying on three main factors.

Artificial intelligence and machine learning within the supply chain. It is time to refresh sales and operating procedures to set the stage for AI and ML in supply chain. As the immediate pandemic issues are being solved, the focus needs to shift to formalizing processes to help employees handle new realities faster, while balancing customer care and service with inventory and operating costs.

The labor-intensive and highly suspect processes of data aggregation and cleansing deemed adequate pre-pandemic are no longer sustainable. Manual analysis and personal judgment need to be paired with hypothesis-based AI initiatives. Nimble organizations will establish improved information management using data and templated architecture-based frameworks to promote quick concept development. A new partnership between supply chain and IT should identify processes that can be automated or prioritized for deep-learning algorithms. Open-source technologies can train advanced AI and ML algorithms and inject deep learning in demand planning. Companies should not become dependent on a packaged provider’s feature roadmap for competitive differentiation. Supply chain can become more people-centric and transparent, giving employees the opportunity for analytical decision-making to build confidence with customers and meet shifting demand.

Adopting more secure and transparent local supply sources. In a supply-constrained business environment, securing the value chain is leading to stronger emphasis on partnerships with local sources, moving local products into the supply chain and streamlining delivery. To support local suppliers, supply-constrained organizations need to take steps to secure product sources, with favorable payment terms and other mechanisms for business continuity. Ultimately, the challenge will still return to data. However, only 20 to 40 percent of the data needed to tender new sources is centrally stored. Instead, it is often scattered across a company in non-standardized formats or siloed in different departments. Centralizing data can overcome this but requires the urgent adoption of cloud-data-platform strategies.

Address new analytical challenges brought on by innovation. Social isolation created unmet needs as product availability in the last mile stretched supply-chain operating principles. Because of this:

• Autonomous stores could gain momentum. In a Capgemini survey, two-thirds of Millennials were willing to shift purchases to a store with automated technologies. More highly automated stores will drive greater supply-chain efficiency. The report predicts increased store automation can help retailers avoid shrinkage and stockouts and reduce operating costs, and it will also limit employee exposure.
• Gig-economy workers are supporting delivery-to-home service for almost everything, putting additional strain on businesses deemed essential and inventory pressure on traditional formats and in-stock items.
• Micro-space plans for merchandise will be stretched into new formats, such as pop-up stores in hospitals, new partnerships taking advantage of closed stores, and retail in grocery stores. It will create new demands on supply-chain systems and analytical models.

The rise of a more resilient supply chain

The vulnerability of seamless just-in-time, just-enough supply chains becomes clear in times of great disruption. New models are now needed to build more resilience into systems, and more black-swan analytics are needed to ensure sufficient robustness. Furthermore, organizational- and business-process change is needed to ensure agility to adapt to new circumstances.

Transparency could also help manage customers’ physical and psychological safety. People are more likely to engage in hoarding when driven by anxiety, fear, and panic, for example. Most people know shortages will be short-lived but have trouble accepting that emotionally, and these anxieties are more readily transmitted to others through social media. The US instituted the Federal Deposit insurance Corporation (FDIC) to prevent runs on banks, and perhaps companies could show a surplus of supply to reassure customers.

Many companies have used sentiment analysis tools to understand how customers view their brand. At times when customers still have a high demand for products or services but face constraints in procuring them, sentiment analysis can be repurposed to identify and adapt to frictions customers are experiencing. Similarly, with constrained supply chains, sentiment analytics can deliver supply-chain insights to understand what challenges suppliers are facing, so companies can proactively reach out to offer support and anticipate bottlenecks.

Companies have for a long time used analytics to identify their most loyal and most profitable clients. In times of disruption, this insight should be leveraged to go above and beyond the service customers expect. For example, ensuring continuity of service through alternative delivery methods, additional discounts to specific customer groups, extended loyalty programs, or perhaps even small signs of empathy through targeted engagement activities.

A resilient supply chain is more connected and offers greater visibility when built on a foundation of data. These elements deliver a better customer experience even in a disrupted or rapidly changing market. It is time to connect supply chain to every aspect of the business with data.